GovernmentType: Republic.Independence: 1821. Constitution: The 1987 Sandinista-era constitution was changed in 1995 to provide for a more even distribution of power among the four branches of government and again in 2000 to increase the Supreme Court and the Controller General's Office and to make changes to the electoral laws. Branches: Executive--president and vice president. Legislative--National Assembly (unicameral). Judicial--Supreme Court; subordinate appeals, district, and local courts; separate labor and administrative tribunals. Electoral--Supreme Electoral Council, responsible for organizing and holding elections.Administrative subdivisions: 15 departments and two autonomous regions on the Atlantic coast; 145 municipalities. Political parties: Sandinista National Liberation Front (FSLN); Nicaraguan Liberal Alliance (ALN); Liberal Constitutionalist Party (PLC); Sandinista Renewal Movement (MRS); Alternative for Change (AC). Suffrage: Universal at 16.

PEOPLEMost Nicaraguans are of both European and Indian ancestry, and the culture of the country reflects the Ibero-European and Indian heritage of its people. Only the Indians of the eastern half of the country remain ethnically distinct and retain tribal customs and languages. A large black minority, of Jamaican origin, is concentrated on the Caribbean coast. In the mid-1980s, the central government divided the eastern half of the country--the former department of Zelaya--into two autonomous regions and granted the people of the region limited self-rule.

Roman Catholicism is the major religion, but Evangelical Protestant groups have grown recently, and there are strong Anglican and Moravian communities on the Caribbean coast. Most Nicaraguans live in the Pacific lowlands and the adjacent interior highlands. The population is 58% urban.

HISTORYNicaragua takes its name from Nicarao, chief of the indigenous tribe that lived around present-day Lake Nicaragua during the late 1400s and early 1500s. In 1524, Hernandez de Cordoba founded the first Spanish permanent settlements in the region, including two of Nicaragua's principal towns: Granada on Lake Nicaragua, and Leon east of Lake Managua. Nicaragua gained independence from Spain in 1821, briefly becoming a part of the Mexican Empire and then a member of a federation of independent Central American provinces. In 1838, Nicaragua became an independent republic.

Much of Nicaragua's politics since independence has been characterized by the rivalry between the Liberal elite of Leon and the Conservative elite of Granada, which often led to civil war. Initially invited by the Liberals in 1855 to join their struggle against the Conservatives, an American named William Walker and his "filibusters" seized the presidency in 1856. The Liberals and Conservatives united to drive him out of office in 1857. Three decades of Conservative rule followed. Taking advantage of divisions within the Conservative ranks, Jose Santos Zelaya led a Liberal revolt that brought him to power in 1893. Zelaya ended a longstanding dispute with Britain over the Atlantic Coast in 1894, and reincorporated that region into Nicaragua.

By 1909, differences had developed over a trans-isthmian canal and concessions to Americans in Nicaragua; there also was concern about what was perceived as Nicaragua's destabilizing influence in the region. In 1909 the United States provided political support to Conservative-led forces rebelling against President Zelaya and intervened militarily to protect American lives and property. With the exception of a 9-month period in 1925-26, the United States maintained troops in Nicaragua from 1912 until 1933. From 1927 until 1933, U.S. Marines stationed in Nicaragua engaged in a running battle with rebel forces led by renegade Liberal Gen. Augusto Sandino, who rejected a 1927 negotiated agreement brokered by the United States to end the latest round of fighting between Liberals and Conservatives.

After the departure of U.S. troops, National Guard Commander Anastasio Somoza Garcia outmaneuvered his political opponents--including Sandino, who was assassinated by National Guard officers--and took over the presidency in 1936. Somoza and two sons who succeeded him, maintained close ties with the United States. The Somoza dynasty ended in 1979 with a massive uprising led by the Sandinista National Liberation Front (FSLN), which had conducted a low scale guerrilla war against the Somoza regime since the early 1960s.

The FSLN established an authoritarian dictatorship soon after taking power. U.S.-Nicaraguan relations deteriorated rapidly as the regime nationalized many private industries, confiscated private property, supported Central American guerrilla movements, and maintained links to international terrorists. The United States suspended aid to Nicaragua in 1981. The Reagan administration provided assistance to the Nicaraguan resistance and in 1985 imposed an embargo on U.S.-Nicaraguan trade.

In response to both domestic and international pressure, the Sandinista regime entered into negotiations with the Nicaraguan resistance and agreed to nationwide elections in February 1990. In these elections, which were proclaimed free and fair by international observers, Nicaraguan voters elected as their President the candidate of the National Opposition Union, Violeta Barrios de Chamorro.

During President Chamorro's nearly 7 years in office, her government achieved major progress toward consolidating democratic institutions, advancing national reconciliation, stabilizing the economy, privatizing state-owned enterprises, and reducing human rights violations. Despite a number of irregularities--which were due largely to logistical difficulties and a baroquely complicated electoral law--the October 20, 1996 presidential, legislative, and mayoral elections were judged free and fair by international observers and by the groundbreaking national electoral observer group Etica y Transparencia (Ethics and Transparency). This time Nicaraguans elected former Managua Mayor Arnoldo Alem�n, leader of the center-right Liberal Alliance. The first transfer of power in recent Nicaraguan history from one democratically elected president to another took place on January 10, 1997, when the Alem�n government was inaugurated.

Presidential and legislative elections were held in November 2001. Enrique Bola�os of the Liberal Constitutional Party was elected to the Nicaraguan presidency on November 4, 2001, defeating FSLN candidate Daniel Ortega by 14 percentage points. The elections, characterized by international observers as free, fair and peaceful, reflected the maturing of Nicaragua's democratic institutions. During his campaign, President-elect Bola�os promised to reinvigorate the economy, create jobs, fight corruption, and support the war against terrorism. Bola�os was inaugurated on January 10, 2002.

FSLN candidate Daniel Ortega won the Presidential elections of November 5, 2006 with just under 38% of the vote, defeating ALN candidate Eduardo Montealegre, who garnered 29%. Ortega was inaugurated on January 10, 2007.

GOVERNMENT AND POLITICAL CONDITIONSNicaragua is a constitutional democracy with executive, legislative, judicial, and electoral branches of government. In 1995, the executive and legislative branches negotiated a reform of the 1987 Sandinista constitution, which gave extensive new powers and independence to the legislature--the National Assembly--including permitting the Assembly to override a presidential veto with a simple majority vote and eliminating the president's ability to pocket-veto a bill. The president and the members of the unicameral National Assembly are elected to concurrent five-year terms. The National Assembly consists of 92 total deputies (90 elected from party lists drawn at the departmental and national levels, plus the outgoing president and the candidate who finishes second in the Presidential race).

The Supreme Court supervises the functioning of the still largely ineffective, often partisan, and overburdened judicial system. In 2000, as part of the PLC-FSLN pact, the number or Supreme Court justices was increased from 12 to 16. Supreme Court justices are elected to five-year terms by the National Assembly. Led by a council of seven magistrates, the Supreme Electoral Council (CSE) is the co-equal branch of government responsible for organizing and conducting elections, plebiscites, and referendums. The magistrates and their alternates are elected to 5-year terms by the National Assembly. Constitutional changes in 2000 expanded the number of CSE magistrates from five to seven and gave the PLC and the FSLN a freer hand to name party activists to the Council, prompting allegations that both parties were politicizing electoral institutions and processes and excluding smaller political parties.

Freedom of speech is a right guaranteed by Nicaragua's constitution and vigorously exercised by its people. Diverse viewpoints are freely and openly discussed in the media and in academia. There is no state censorship in Nicaragua. Other constitutional freedoms include peaceful assembly and association, freedom of religion, and freedom of movement within the country, as well as foreign travel, emigration, and repatriation. The government also permits domestic and international human rights monitors to operate freely in Nicaragua. The constitution prohibits discrimination based on birth, nationality, political belief, race, gender, language, religion, opinion, national origin, and economic or social condition. All public and private sector workers, except the military and the police, are entitled to form and join unions of their own choosing, and they exercise this right extensively. Nearly half of Nicaragua's work force, including agricultural workers, is unionized. Workers have the right to strike. Collective bargaining is becoming more common in the private sector.

Political Parties

While three parties participated in the 2001 national elections (PLC, FSLN, and PC), five participated in the 2006 elections (FSLN, ALN, PLC, MRS, and AC). Of the 92 seats in the National Assembly (installed January 9, 2007), the FSLN holds 38 seats, the PLC 25, the ALN 24 and the MRS 5.

Principal Government OfficialsPresident--Jose Daniel Ortega SaavedraVice President--Jaime Morales Carazo Foreign Affairs Minister--Samuel SantosFinance Minister--Alberto Jose Guevara ObregonMinister of Industry and Commerce--Horacio Brenes IcabalcetaMinister of Government--Ana Isabel MoralesAdministrator of the Ministry of Defense--Juan Uma�a LoaisigaAmbassador to the United States--TBDAmbassador to the United Nations--TBDAmbassador to the Organization of American States--TBD

Nicaragua maintains an embassy in the United States at 1627 New Hampshire Avenue, NW, Washington, DC 20009 (tel. 202-387-4371).

ECONOMYNicaragua began free market reforms in 1991 after 12 years of economic free-fall under the Sandinista regime. Despite some setbacks, it has made dramatic progress: privatizing more than 350 state enterprises, reducing inflation from 13,500% to 9.6%, and cutting the foreign debt in half. The economy began expanding in 1994 and grew 4% in 2005, with overall GDP reaching $4.91 billion in 2005.

Nicaragua remains the second-poorest nation in the hemisphere. Unemployment is officially around 12.2%, and another 35.4% are underemployed. Nicaragua suffers from persistent trade and budget deficits and a high debt-service burden; foreign assistance, including donations and debt relief, totaled 42% of GDP in 2004.

One of the key engines of economic growth has been production for export. Exports were $857 million in 2005. Although traditional products such as coffee, meat, and sugar continued to lead the list of Nicaraguan exports, the fastest growth is now in nontraditional exports: maquila goods (apparel); gold; seafood; and new agricultural products such as peanuts, sesame, melons, and onions. Nicaragua also depends heavily on remittances from Nicaraguans living abroad. Nicaragua is primarily an agricultural country, but construction, mining, fisheries, and general commerce also have been expanding during the last few years. Foreign private capital inflows topped $300 million in 1999 but, due to economic and political uncertainty fell to less than $100 million in 2001. This trend has been reversed to a degree during the government of President Bola�os. Foreign direct investment reached 250 million in 2004.

Rapid expansion of the tourist industry has made it the nation's third-largest source of foreign exchange. Some 60,000 Americans visit Nicaragua yearly--primarily business people, tourists, and those visiting relatives. An estimated 5,300 U.S. citizens reside in the country. The U.S. Embassy's consular section provides a full range of consular services--from passport replacement and veteran's assistance to prison visitation and repatriation assistance.

Nicaragua faces a number of challenges in stimulating rapid economic growth. Long-term success at attracting investment, creating jobs, and reducing poverty depend on its ability to comply with an International Monetary Fund (IMF) program, resolve the thousands of Sandinista-era property confiscation cases, and open its economy to foreign trade. This process was boosted in late 2000 when Nicaragua reached the decision point under the Heavily Indebted Poor Countries (HIPC) debt relief initiative. However, HIPC benefits will be delayed because Nicaragua subsequently fell "off track" from its IMF program. The country also has been grappling with a string of bank failures that began in August 2000. The macroeconomic policies implemented by the Bola�os administration helped the economy grow by 5.1% in 2004. Fiscal deficits have been reduced through increased tax collection and consolidated public sector expenditures.

International reserves have increased from US$274 million in 2001 to US$ 670 million in 2004. The IMF's Poverty Reduction and Growth Facility (PRGF) was suspended because a political stalemate between the executive and legislative branches prevented Nicaragua from meeting program preconditions.

The Central American Free Trade Agreement (CAFTA) came into force between the United States and Nicaragua on April 1, 2006. The U.S. is the Nicaragua's largest trading partner by far--the source in 2005 of roughly one fifth of Nicaragua's imports and the destination about a third of its exports. About 25 wholly or partly owned subsidiaries of U.S. companies operate in Nicaragua. The largest of those investments are in the energy, communications, manufacturing, fisheries, and shrimp farming sectors. Good opportunities exist for further investments in those same sectors, as well as in tourism, mining, franchising, and the distribution of imported consumer, manufacturing, and agricultural goods.

The U.S. Embassy's economic and commercial section advances American economic and business interests by briefing U.S. firms on opportunities and stumbling blocks to trade and investment in Nicaragua; encouraging key Nicaraguan decision-makers to work with American firms; helping to resolve problems that affect U.S. commercial interests; and working to change local economic and trade ground rules in order to afford U.S. firms a level playing field on which to compete. U.S. businesses may access key Embassy economic reports via the mission's Internet home page at http://managua.usembassy.gov/.

FOREIGN RELATIONSThe 1990 election victory of President Violeta Chamorro placed Nicaragua in the ranks of Latin American democracies. Nicaragua pursues an independent foreign policy. A participant of the Central American Security Commission (CASC), Nicaragua also has taken a leading role in pressing for regional demilitarization and peaceful settlement of disputes within states in the region. Nicaragua has submitted two territorial disputes--one with Honduras and the other with Colombia--to the International Court at The Hague for resolution.

On the San Juan River there have been disagreements regarding navigational rights in the Nicaragua-Costa Rica border area. Nicaragua and Costa Rica signed a three-year agreement in September of 2002 to defer presenting these issues before the International Court of Justice (ICJ) for resolution. After the two governments failed to reach an amicable solution, Costa Rica filed a case before the ICJ. While the case is currently pending, the two countries jointly fund community development projects in the border area. At the 1994 Summit of the Americas, Nicaragua joined six Central American neighbors in signing the Alliance for Sustainable Development, known as the Conjunta Centroamerica-USA, or CONCAUSA, to promote sustainable economic development in the region.

Nicaragua belongs to the United Nations and several specialized and related agencies, including the World Bank, the International Monetary Fund (IMF), World Trade Organization (WTO), UN Educational, Scientific, and Cultural Organization (UNESCO), World Health Organization (WHO), Food and Agriculture Organization (FAO), International Labor Organization (ILO), and UN Human Rights Commission (UNHRC). Nicaragua also is a member of the Organization of American States (OAS), the Non-aligned Movement (NAM), the International Atomic Energy Commission (IAEA), the Inter-American Development Bank (IDB), and the Central American Bank for Economic Integration (CABEI).

U.S.-NICARAGUAN RELATIONSU.S. policy aims to continue supporting the consolidation of the democratic process initiated in Nicaragua with the 1990 election of President Chamorro. The United States has promoted national reconciliation, encouraging Nicaraguans to resolve their problems through dialogue and compromise. It recognizes as legitimate all political forces that abide by the democratic process and eschew violence. U.S. assistance is focused on strengthening democratic institutions, stimulating sustainable economic growth, and supporting the health and basic education sectors.

The resolution of U.S. citizen claims arising from Sandinista-era confiscations and expropriations still figures prominently in bilateral policy concerns. Section 527 of the Foreign Relations Authorization Act (1994) prohibits certain U.S. assistance and support for a government of a country that has confiscated U.S. citizen property, unless the government has taken certain remedial steps. In July 2005, the Secretary of State issued a 12th annual national interest waiver of the Section 527 prohibition because of Nicaragua's record in resolving U.S. citizen claims as well as its overall progress in implementing political and economic reforms.

Developing a free market economy with respect for property and intellectual property rights;

Ensuring effective civilian control over defense and security policy;

Increasing the effectiveness of Nicaragua's efforts to combat transborder crimes, including narcotics trafficking, money laundering, illegal alien smuggling, international terrorist and criminal organizations, and trafficking in persons; and

Reforming the judicial system and implementing good governance.

Since 1990, the United States has provided over $1.2 billion in assistance to Nicaragua. About $260 million of that was for debt relief, and another $450 million was for balance-of-payments support. The U.S. also provided $93 million in 1999, 2000, and 2001 as part of its overall response to Hurricane Mitch. Aside from funding for Mitch reconstruction, the levels of assistance have fallen incrementally to reflect the improvements in Nicaragua. Assistance has been focused on promoting more citizen political participation, compromise, and government transparency; stimulating sustainable growth and income; and fostering better-educated and healthier families. The Millennium Challenge Corporation, signed a five-year, $175 million Compact with the Republic of Nicaragua on July 14, 2005. The Millennium Challenge Compact will reduce poverty and spur economic growth by funding projects in the regions of Le�n and Chinandega aimed at reducing transportation costs and improving access to markets for rural communities; increasing wages and profits from farming and related enterprises in the region, and increasing investment by strengthening property rights.

The U.S. Embassy in Nicaragua is located at Kilometer 4.5, Carretera Sur, Managua (tel. country code 505, phone 266-6010). Letters mailed in the U.S. should be addressed to American Embassy Managua, APO AA 34021.